The Southern District Court of New York recently rendered a decision in a widely-followed trademark infringement case. The dispute involved Plaintiff, Hermès International, designer and purveyor of the luxury Birkin handbag, and Defendant-artist, Mason Rothschild, creator and seller of non-fungible tokens ("NFTs") depicting "MetaBirkins" or "fur-covered" Birkin handbags. In this case, a federal jury determined that the artist's NFTs, digital versions of the Birkin handbag, infringed upon Plaintiff's trademark rights. The jurors also concluded that the NFTs were not protected speech under the First Amendment. The main lesson to be learned from this decision concerns the need to procure a license to use another's intellectual property by way of a specially-crafted NFT trademark agreement, or risk exposure to a lawsuit, liability, and bad press.

Critical Details of the NFT Trademark Decision

Although the NFT market has been trending downward, there are still important, relevant concepts to understand about NFTs and trademark rights. The recent court decision exemplifies the need to carefully consider the prospect of using another's intellectual property in a prospective NFT venture. Plaintiff's Birkin handbags are both iconic among the consuming public and quite expensive. Upon learning of the MetaBirkins NFT collection, Plaintiff sued the artist, arguing that its "trademark was being diluted and that potential consumers might be fooled into buying the unaffiliated virtual goods." Defendant claimed, among other things, that the NFTs amounted to art which was protected by the First Amendment as free speech. However, by ruling in favor of the Plaintiff, the jury concluded that the MetaBirkins were akin to commodities and, therefore, subject to trademark protection. By this rationale, it was determined that the artwork embodied in the NFTs was not entitled to the trademark law fair use exception.

NFT Trademark Rights, Lessons Learned

As demonstrated by this decision, one type of "theft" in the NFT space is the unauthorized use of third-party intellectual property to create digital NFT art. According to a recent news report, artists have lamented that, "the prevalence of theft in the NFT space shows how its most-touted feature—IP protection—turned out to be its biggest drawback." Minters, who knowingly or unknowingly, use third-party intellectual property (including copyright-protected materials) to create their NFT collections are exposed to the risk of lawsuits and significant financial liability. To avoid such an unfortunate outcome, NFT creators and sellers are encouraged to enter into an agreement with intellectual property owners prior to using their marks as part of an NFT collection. Companies seeking to mint, sell and/or license NFTs must be certain that they own or have the proper license to use the underlying art in question.

Who Can Help with Addressing NFT Trademark Right Concerns?

If you plan to develop an NFT collection of your own, make sure that you adequately acquire the proper rights to use another's intellectual property. Not only is the NFT landscape rapidly changing, but the provisions contained in well drafted NFT agreements are also very nuanced and complicated. Given the foregoing, it is important that you consult with attorneys experienced in the space to avoid NFT-related litigation.

Related Blog Posts:

NFTs And Intellectual Property: Beware Of Theft!

Yes, You Need An NFT Artist Contract!

NFT Trademarks: DOs And DON'Ts

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.